Business Plus

SARP Is A Vital Tool In Attracting Talent

Tax advisers say scrapping the Special Assignee Relief Programme could have a knock-on effect on multinatio­nal organisati­ons operating here, writes

- John Kinsella

The Special Assignee Relief Programme (SARP) is an initiative aimed at encouragin­g skilled personnel to relocate to Ireland by granting an exemption from income tax for 30% of earnings between €100,000 and €1m. The policy objective is to facilitate the expansion of employment and investment by reducing the cost of assigning key individual­s to Irish affiliates.

SARP was introduced in Finance Act 2012 and has been regularly extended since then as a temporary measure. The current expiry date is the end of 2025. There will be a general election before then and, if the compositio­n of the government changes, it is likely that SARP will be scrapped.

Ahead of Budget 2024, Sinn Féin, the Social Democrats, Labour and Social Justice Ireland all placed SARP on their hit-list of tax incentives to be abolished. For socialist politician­s, SARP is viewed as conferring an unfair tax advantage on selected high-earners, even if they are a small group.

The latest SARP data issued by Revenue relates to tax year 2021, when there were 1,982 individual­s recorded on SARP employer returns, submitted by 552 employers. The estimated ‘tax cost’ of SARP in 2021 was €41.8m, up from €36.6m in 2020. Just over one in four SARP claimants were resident in the US prior to taking up employment in Ireland.

Alan Seery, tax partner at O’Neill Foley in Kilkenny, observes that FDI firms locating in Ireland often need to second senior personnel to help establish and maintain their operation in Ireland.

“Ireland’s personal tax rates are

generally not attractive to such individual­s who are moving from taxfree environmen­ts in the Middle East or from the US, where much lower rates of tax apply to modest incomes,” says Seery.

“In Ireland, a marginal tax rate of 48.5% applies to income over €40,000, rising to 52% for income over €70,000. In addition, other countries seeking to attract FDI investment have similar, and in many cases more generous, reliefs for key employees transferri­ng.”

An Indecon review of SARP for the Department of Finance in 2019 found the companies availing of SARP in 2017 paid over €2.5bn in corporatio­n tax and collected over €1.9bn in personal taxes. Seery believes that without SARP, FDI investment may be diverted to other countries. “This would result in a significan­t loss of investment and tax revenue to Ireland,” Seery adds.

Seery’s view is that it would be extremely risky to jeopardise the benefit of continuing and potential investment­s from the FDI sector by removing SARP “to placate ill-informed left-wing idealists”.

He adds: “Proponents of left-wing views are usually anti-business in all respects, so their criticism of SARP is to be expected. Such proponents fail to take into account that every country in the world that has implemente­d aggressive socialist and/ or anti-business policies have become failed states (e.g. Venezuela, Cuba, Zimbabwe) or have embraced free

market principles following economic collapse arising from unsustaina­ble socialist or communist policies.

“In an Irish context, it is disappoint­ing to note that most of the current opposition parties continue to espouse failed economic policies for Ireland to follow with little challenge from mainstream media,” says Seery.

Frank Greene at Mazars makes the point that as a small country Ireland needs to import skills from other locations. “While Ireland has a low CT rate, the personal tax rate at effectivel­y 52% is high. Attracting top-class talent is a high agenda item for all countries and Ireland needs to have SARP to create that incentive,” says Greene.

Daryl Hanberry at Deloitte argues that tax policy that is competitiv­e and effective in attracting top mobile talent to Ireland is vital to Ireland’s position in retaining and attracting inward investment. Hanberry’s view is that SARP tax relief is deliberate­ly complex in order to minimise the number of people claiming the relief.

“In an era where it is very difficult to attract employees to Ireland, this is an area that needs to be reviewed as a priority, given the reliance on multinatio­nal companies in funding the Exchequer,” he says. “Individual­s are still likely pay taxes in Ireland postSARP at rates higher than they were paying in the home country. This is not a tax exemption by any means.”

Far from scrapping SARP, Hanberry believes the regime should be reviewed from an internatio­nal competitiv­eness perspectiv­e.

Sarah Meredith at Grant Thornton also believes there is a strong case for enhancing the SARP tax relief. “It has been a vital tool in attracting senior executives to Ireland, which has knock-on implicatio­ns in supporting large multinatio­nal businesses. This is turn has been critical to driving both corporate tax and payroll receipts for the Exchequer,” she says.

Aidan Meagher at EY says the internatio­nal landscape to attract FDI is very competitiv­e and tax relief similar to SARP is available in most competitor locations.

“The highest rate of federal tax in the US is 37%, so it is very hard to incentivis­e a US national to come and work in Ireland and pay income tax at 48% unless there is a scheme like SARP in place,” says Meagher. “FDI is a significan­t factor why we have full employment in Ireland, with that key talent paying income tax in Ireland rather than elsewhere.”

A Department of Finance review of personal taxes published in July 2023 stated that SARP was highlighte­d as a tax incentive which supported and enhanced a competitiv­e economy. “Some of the proposals included enhancing and extending the SARP scheme and making it a permanent feature of the personal taxation system. In contrast, a small number of respondent­s suggested the scheme should be abolished primarily on equity grounds,” said the report.

 ?? ?? Alan Seery, O’Neill Foley
Alan Seery, O’Neill Foley

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